Crowdfunding is the way forward for smaller companies

​Crowdfunding is set to become a mainstream source of finance for small and medium sized businesses, according to a leading business adviser.​

​The rapid growth of crowdfunding during the recession and banking crisis means that it is now seen as a credible alternative to traditional banks​, said Simon Gray, tax partner at accountants and business advisers Hentons.​

Since it first emerged in the late 1990s, crowdfunding has seen dramatic growth, driven by advances in technology, growth of online channels and increasing consumer dissatisfaction with traditional funding providers.

Originally launched as a method of raising small sums of money from a large group of people including friends, family, customers and supporters, the amount of money invested in crowdfunding in the UK has seen 100 per cent growth every year over the past three years and Mr Gray said it is now doubling in size every 60 days. Th​is​ is against a background of falls in lending by large banks to small businesses.

Mr Gray said that crowdfunding has changed dramatically since the campaign by British rock band Marillion in 1997, when it raised ​£40​,000 in donations from fans to fund its US tour.

“Crowdfunding started out as a way for people who believe in a cause to donate to support it and in return they could be offered rewards such as tickets to an event, free gifts or even acknowledgement on a rock band’s album cover​,” he said​. “Now it has become such a successful alternative source of finance that is almost mainstream.”